Creating a More Inclusive and Sustainable Future
Cost-Saving Synergy: Energy Stacking in Battery Energy Storage Systems
Management Science
Despite the great potential benefits of battery energy storage systems (BESSs) to electrical grids, most standalone uses of BESS are not economical due to batteries’ high upfront costs and limited lifespans. Energy stacking, a strategy of providing two or more services with a single BESS, has been of great interest to improve profitability. However, some key questions, for example, the underlying mechanism by which stacking works or why and how much it may improve profitability, remain unanswered in the literature. Using two popular battery services, we analytically show that there often exists cost-saving synergy -- the cost of performing both services at the same time (simultaneous stacking) is smaller than the sum of individual costs if we had performed each service alone -- which allows for bigger profits. Furthermore, we perform comparative statics on the optimal mix of the services to systemically characterize grid/market conditions that maximize/minimize this synergy. We also derive a theoretical upper bound on simultaneous stacking’s benefits, showing that it can approximately double the profit of the best standalone service. Several generalizations of the base model not only show that the main lessons continue to hold but also that stacking’s benefits may become even stronger.
Joonho Bae (Indiana University), Roman Kapuscinski (University of Michigan), John Silberholz (UMD)
Unlocking Forecast Quality: The Power of Material Sustainability Disclosures
Accounting and Business Research
In 2013, the Sustainability Accounting Standards Board (SASB) began releasing guidelines to identify material (or financially relevant) sustainability metrics. This study investigates the effects of material and immaterial sustainability activities on analyst forecast error and dispersion. We further examine how these effects are influenced by the issuance of stand-alone sustainability reports and the release of SASB’s material sustainability standards. Using a sample of US firms from 2005 to 2018, we find that material sustainability activities are associated with more accurate and less dispersed analyst forecasts when firms issue stand-alone sustainability reports. Among firms that do not release such reports, material sustainability activities improve forecast quality only after the initial release of the SASB standards. Immaterial sustainability activities appear to add noise to information in the financial market and confound earnings forecasts, especially during the pre-SASB period, but this confounding effect reverses in the post-SASB period. Overall, our findings provide empirical evidence that classifying and disclosing corporate sustainability activities yield economic and informational benefits in capital markets.
Sue A. Cooper PhD EA CMA MEd MBA, Visiting Associate Clinical Professor of Accounting, University of Maryland, College Park, and Jennifer Yin PhD, Professor of Accounting, University of Texas at San Antonio, and Harrison Liu PhD, Associate Professor of Accounting University of Texas at San Antonio
Effects of Greenhouse Gas Emissions and Climate Change Policy on Audit Fees
Accounting and the Public Interest, December 2025
This study explores the correlation between greenhouse gas (GHG) emissions from U.S. companies and their audit fees, driven by the escalating frequency and intensity of extreme weather events. Building on prior research that connects climate risk, regulation, and audit fees, our investigation uses a sample of companies with Scope 1 GHG emissions sourced from the U.S. Environmental Protection Agency’s (EPA’s) Greenhouse Gas Reporting Program (GHGRP). Our results show a positive association between GHG emissions and audit fees. Additionally, we find that regulatory uncertainty surrounding U.S. climate policy intensifies this relationship. Our findings are robust to alternate model and variable specifications. This research benefits managers and policymakers by highlighting some of the financial consequences of corporate GHG emissions, especially when combined with inconsistent climate policies. It is also beneficial to accountants in practice or researchers interested in refining their audit fee models.
Sue A. Cooper PhD EA CMA MEd MBA, Visiting Associate Clinical Professor, University of Maryland, College Park, and Jared B. Cooper MEd, Certified MD Educator, Wicomico County Board of Education
Biodiversity Entrepreneurship
Review of Finance
We study an emerging class of start-up organizations focused on biodiversity conservation and the challenges they face in financing these ventures. Using a novel machine learning method, we identify 630 biodiversity-linked start-ups in PitchBook and compare their financing dynamics to other ventures. Biodiversity start-ups raise less capital but attract a broader coalition of investors, including not only venture capitalists (“value investors”) but also mission-aligned impact funds and public institutions (“values investors”). Values investors provide incremental capital rather than substituting value investors, but funding gaps persist. We show biodiversity-linked start-ups use social media activity to help connect with value investors. Our findings can inform policy and practice for mobilizing private capital toward biodiversity preservation, emphasizing hybrid financing models and strategic communication.
Sean Cao, Robert H. Smith School of Business, University of Maryland
EPA Scrutiny and Voluntary Environmental Disclosures
Review of Accounting Studies
Market participants have called on the SEC to address the lack of disclosures about firms’ environmental impacts, investments, and exposures. However, the frictions that obstruct the flow of environmental information are not well understood. I shed light on these frictions by examining whether scrutiny by the Environmental Protection Agency (EPA) restricts the firm’s voluntary environmental disclosures in earnings conference calls. Consistent with the notion that EPA scrutiny gives rise to disclosure frictions, I find a negative relation between EPA scrutiny and the environmental disclosures of scrutinized firms. This negative relation is concentrated among firms without environmental expert directors, suggesting that environmental governance mitigates the chilling effect of EPA scrutiny. In terms of disclosure quality, I show that environmental disclosures include fewer quantitative details under EPA scrutiny. Collectively, these findings provide insights into the frictions that restrict the flow of environmental information to market participants, an important issue given the SEC’s efforts to improve current disclosure practices.
Mark Zakota, Assistant Professor, Robert H. Smith School of Business, University of Maryland
Applied AI for finance and accounting: Alternative data and opportunities
February 2024
Big data and artificial intelligence (AI) have transformed the finance industry by altering the way data and information are generated, processed, and incorporated into decision-making processes. Data and information have emerged as a new class of assets, facilitating efficient contracting and risk-sharing among corporate stakeholders. Researchers have also increasingly embraced machine learning and AI analytics tools, which enable them to exploit empirical evidence to an extent that far surpasses traditional methodologies. In this review article, prepared for a special issue on Artificial Intelligence (AI) and Finance in the Pacific-Basin Finance Journal, we aim to provide a summary of the evolving landscape of AI applications in finance and accounting research and project future avenues of exploration. Given the burgeoning mass of literature in this field, it would be unproductive to attempt an exhaustive catalogue of these studies. Instead, our goal is to offer a structured framework for categorizing current research and guiding future studies. We stress the importance of blending financial domain expertise with state-of-the-art data analytics skills. This fusion is essential for researchers and professionals to harness the opportunities offered by data and analytical tools to better comprehend and influence our financial system.
Sean Cao, Associate Professor (with tenure), Robert H. Smith School of Business, University of Maryland, United States of America